Sunday, 31 March 2013

Some cheering news from the Centre for Economics and Business Research ..The cost of the average home will
jump by nearly £50,000 over the next five years, partly fuelled by the
Government’s mortgage lending scheme, a report reveals today.The
Centre for Economics and Business Research said house prices will pass
their pre-recession peak next year and will go on to hit record highs at
a time when millions cannot afford to buy their own home.

The
economic consultancy predicts the £130billion lending scheme, unveiled
in last month’s Budget, will add more than £1,000 to the price of a
property next year.

Economist Daniel Solomon, who wrote
the report, said: ‘By 2018, we expect the typical UK home will cost
£267,000, over 20 per cent more than this year.‘We expect the Chancellor’s new Help to Buy scheme will push up house prices before it raises housing supply.’Although
full details of the scheme have not yet been published, the CEBR
predicts it could ‘raise prices by up to 0.8 per cent in 2014 without
having any appreciable impact on housing supply’.

For example "On the welfare sanctions revolt"- For the benefit of those who may not know what "the welfare sanctions revolt is" that is a reference to 40 Labour MPs defying the party whip and voting against the jobseekers (back to work schemes) bill when it got its second reading in the Commons in the middle of March, when the Labour Whips, on Ed's say so, had ordered Labour MPs not to vote against this emergency government legislation aimed at blocking compensation payments for people who were illegally sanctioned for not taking part in work experience programmes.I think it’s useful to explain the decision we made. Explain away Ed ....I’m concerned, Liam is concerned, about the people who are wrongly sanctioned."Wrongly sanctioned - as in "had a sanction applied to them that was say, illegal, because there was no legislative basis for it"?

We’ve got to protect that – we did that by protecting people’s appeal rights.So you made sure that anyone who felt they had been wrongly, unfairly or even illegally sanctioned "could appeal against it". By not voting you did that? Well done you.Secondly there’s an issue around the massive increase in sanctions. Iain Duncan Smith denies there’s targets – it turns out there are targets – we’ve got to have an independent review of that.So you are determined to get to the bottom of this "targets" business; are there, or aren't there explicit or even implicit targets whereby "any excuse will do as a reason for dishing out a sanction"? ... By not voting you ensured there would be that fully independent review? Well done you.

But then you come to the question “Should we vote against all of the sanctions that have been applied under the work programme?”, almost all of them since 2011, and I didn’t think that was right.Now I am not entirely sure I follow that line of thinking Ed - In the Appeal case that you are apparently referring to the Judges didn't say "sanctions per se are illegal" they said "the sanctions issued under this particular scheme were illegal, because the scheme hadn't been correctly drafted".

You have said it was important to ensure there was a right of appeal for people who are sanctioned, you said you are concerned about the rapid rise in the number of people being sanctioned and believing this is the result of operating to some "sanctions" target yet, when it came to the matter of someone having appealed against the way the system was used against them, and the Courts having sided with that person and declared that their being sanctioned was illegal, because the scheme hadn't been properly and legally drawn up, and actually anyone sanctioned under those non existent powers had been illegally sanctioned and would be entitled to receive any JSA that had been withheld from them, illegally, you and your party obligingly "abstain" - never mind vote against - so a government Bill can be rushed through to make sure all those illegally sanctioned people get nothing, and then excuse that by claiming that it was important to endorse the idea of sanctions and their use.And I take full responsibility for the decisions we made. I think Liam [Byrne] is doing an excellent job. I think he is both emphasising responsibility – which does matter to us – but also showing the importance of compassion in the system. And that’s why he’s campaigning as he is on the bedroom tax. As for the colleagues who took a different view, I understand why they were angry about what the Tories had done, but I felt we took the right decision and I still feel we took the right decision.”Righty oh Ed. So just to be clear - people can appeal against being sanctioned and having their benefits removed, and the Labour party is fully behind them having the right to appeal but if they succeed the Labour party also fully supports the appeal judgement being ignored, and if necessary changing the law retrospectively to make sure it is, and they still get nothing. Yeah, come to think of it, that is cockeyed enough to be immediately recognisable as a well thought through policy line.If Labour do get in in 2015 I think we can safely assume they'll take up and run all these schemes they are forever declaring are wrong and unfair much more effectively than the present shower.

Except he doesn't mention it. But everyone's favourite "man prepared to think the unthinkable" Frank Field has some quite damning things to say about the way the government he swiftly agreed to be "an advisor on poverty to" in 2010 is behaving :-

Bearing in mind how Frank Field is universally loathed BTL, and often damned as one that should join the Blue Tories, it should be quite funny seeing how many CiFers are now desperate to claim that he is always worth listening to, and that they've always actually liked him.

Friday, 29 March 2013

So if they could have brought their strictly regulated allowable goods cheaper elsewhere ASDA will surely refund the difference like they advertise on TV ... or will that only apply to decent people using cash, or proper debit and credit cards.

Asda has partnered the UK's biggest local authority to provide emergency welfare to some of the country's poorest people.

Birmingham council, which represents around 1 million people, said that from 1 April Monday it would give out crisis welfare payments in the form of prepaid cards that could be redeemed only in Asda supermarkets.

The Labour authority said the cards – which Asda said were similar to their gift cards – would restrict spending to a list of predetermined goods, which would exclude tobacco, alcohol, phone-related expenditure and fuel.

How jolly public spirited and splendid of ASDA, eh to facilitate this

Asda said: "We responded to an approach from Birmingham city council, which was looking for a simple way of delivering social fund payments to claimants. "Making money available via Asda gift cards rather than cash is a safe way to ensure claimants have access to a huge range of products at low prices, and is an efficient use of the public purse."

And nothing whatsoever to be gained by ASDA in having this "locked in to only using us" scheme obviously.

So why did Labour controlled Birmingham decide to go with ASDA?

Asked why Birmingham was restricting choice by partnering only with Asda, a council spokesman said the chain had been "the only main supermarket in the city willing to work with the council".

The delay appears to be an admission by the Government that they do not have the training, computer programmes and experience in place to avoid embarrassing mistakes which could lead to people not receiving the benefits to which they are entitled. In its announcement of the delay the Department of Work and Pension made no attempt to explain why it was unable to proceed as planned.

Absolutely not so, as a government spokesperson quickly made clear :-

"Now look here, when will you naysayers and disbelievers stop "reading between the lines" like this ... UC is on track, it will remain on track, we are simply slowing down a bit, giving ourselves time to assimilate important new information, like that the f-ing IT doesn't in a lot of cases exist yet, and where it does exist the f-ing software stuck on it doesn't f-ing work and .... er sorry about that, ignore the last few comments please, it is a really tiring and stressful job being a spokesperson for the DWP what I meant to say was, and on this you can quote me, this decision has only been taken because ..."

"it was 'sensible' to start with one area* before rolling it out to the other three in July. It will allow us to make any changes that we feel we need to make and see what works and what doesn’t.”

Thursday, 28 March 2013

The controversial finding comes in a major report, Prodnosing and Mental Health, published this week by the Royal College of Psychiatrists.

It says that almost one in three prodnoses* in Britain today is someone with a usually undiagnosed mental disorder. When people with pronounced bansturbation tendencies are included the proportion is significantly higher. Of the ten million prodnosers in Britain, up to three million have a so far undiagnosed mental disorder, up to two million further have been diagnosed and prescribed a psychoactive drug in the past year and approaching one million are clearly addicted to bansturbation, it says.

Prodnosing tendencies increase with the severity of mental disorder suffered, and all fully fledged bansturbators are certainly a danger to ordinary members of the public. Access to easy to obtain taxpayer funding appears to exacerbate the symptoms of anxiety, depression and attention deficit hyperactivity disorder which afflict many prodnosers, tragically elevating them into becoming fully fledged bansturbators in no time at all.

A welfare claimant has criticised the body responsible for overseeing welfare payments, claiming they are trying to 'screw us into the ground'.

Karl McCartney, an unemployed father of six from Lincoln, says he has been forced to borrow £25,000 from doorstep lenders because of late payments by the Department for Work & Pensions (DWP) caused by delays in the processing of his application forms, a situation he claims that many other unemployed face.

Mr McCartney also claims an DWP insider told him the body is purposefully hostile to claimants in an interview with BBC Radio 4.

He said: "It was over £25,000 and that was by the August after I’d put all my forms in in May. That sum of money is a huge sum of money and that was all the money that I'd had to spend out for whatever, for my family, my Sky TV package, and that was owed by the DWP.

"Well my family as well as myself have to live. We've got rent to pay, we've got people to look after and provide for. At the age of 42 I’m not proud of the fact I haven't found a job in years or that I had to take out a payday loan because our credit cards, our bank overdraft were all maxed out and I wasn’t the only one on the estate that had to do that."

Pope Francis will wash windscreens at a busy junction near Rome on Maundy Thursday.

Thousands of pilgrims and tourists are arriving in Rome to attend ceremonies during the holy week ahead of Easter. The quick splash of Holy Water, rinse and squeegee job on the Thursday before Easter is a Christian tradition commemorating Christ's Last Car Journey.

It is part of a papal calendar of events running up to Easter, the most important festival in the calendar of the Catholic Church. On Easter Sunday morning, the new Pope will deliver his first "Fœnerare mihi Euro" message to the commuters of Rome and to the world.

During his inaugural general audience Wednesday, Francis called for an immediate political solution to poor driver visibility in the CAR (Central African Republic) after last weekend's dust storms.

Wednesday, 27 March 2013

Smith was about to deliver a speech on welfare and pensions reform when campaigner Willie Black began haranguing the MP, calling him a "parasite" and a "ratbag" for pursuing social security cuts that would leave "millions" of people homeless.

After Black, who had booked in for an overnight stay at the George Hotel to get into the event hosted by Capita, was escorted from the room, two disability rights campaigners also barracked Smith. Protesters also gathered outside the hotel.

Capita plc has acquired STL Technologies Limited, which provides software and ICT to the criminal justice system, including courts and the police, and to asylum and immigration tribunals.

In fact things are so cosy between Capita and the MOJ that the MOJ has provided a glowing puff piece for the Capita website* and who knows Capita may do so well out of "changes to the justice system and devising new ways of monitoring and rehabilitating offenders" that MOJ HQ gets renamed as CAPITA - Home of the Ministry of Justice

Council tenants are having to pay their biggest increase in rent for three years after four in 10 town halls turned their backs on Government cash to freeze bills.

Local Government secretary Eric Pickles has said town halls had a moral duty to freeze council rents for people struggling with rising household budgets. He set aside £450m over two years as part of the autumn statement package to help support the freeze.

But figures published today show that only 61 per cent of local authorities – 257 out of 421 – have are accepting cash from Whitehall to fund a rent freeze. The remainder have decided not to use the grant money, and instead of increased the rents for millions of low income tenants from the beginning of next month.

A second unnamed ex-officer was sentenced to two years for misconduct. He cannot be named for legal reasons.

By force of habit as much as anything, journalists from The Sun newspaper spent all afternoon on the phone to their narks in the courts and prison services to try and find out which one of their bent coppers has been banged up and are already going through possible puns on the man's name on which to base the headline on tomorrow's front page.

Energy policies which increase price rises this year will cushion consumers from future price rises, but only after consumers have paid in advance for lower percentage increases from a higher base rather than a larger percentage from a smaller base contributing to a rise in average household bills but only if you compare it with a third set of figures which assume larger rises from a larger base and which ignore the fact that part of the future price increases have been front loaded to the present, a report has said.

But it's all right now

By 2020, bills will be 11% - or £166 - lower than they would otherwise have been, but about £300 higher than they were a few years ago but they are still a lot less than they will be in five years time so actually the consumer is making a saving now and should be really happy at how cheap his fuel is, these are the good old days on which we will look back fondly, according to the Department of Energy and Climate Change's report. If you look at it that way, consumers are currently getting a massive discount, making them £100s a year better off.

In fact it's a gas

It looked at policies such as a drive to boost home insulation and promote energy efficient boiler installation. It also looked at policies to drive up the cost of domestic fuel to households. And chose the latter.

But quite expensive gas, obviously

Labour accused the government of doing exactly what they would be doing if they were still in government.

But so long as there is "an in" for the private sector and the LA's use the now dispersed funds "very wisely" - "great idea" ..

The cost of administering each of the 150-plus new welfare assistance schemes is typically equivalent to around 20% of the value of the entire local fund. Several authorities, including the Welsh government, have outsourced the running of the voucher schemes to private contractors.

Yeah, it all stands up "We have no choice but to move to vouchers because the amount the government is providing local authorities to run the replacement local schemes is less in total than that previously provided under the centrally funded Social Fund, and because it is complex running and monitoring a voucher/payment card scheme, we had no choice but to create some complicated and expensive authority run scheme or outsource the running of it, with both immediately further reducing the already reduced amount available by a further up to one fifth" ...

Alistair Darling, former Labour chancellor, has warned that the package of mortgage guarantees announced last week could create “a housing bubble” and risked repeating mistakes of the US subprime crisis. Speaking in a Commons debate on the Budget, Mr Darling claimed that George Osborne had largely “given up on doing anything” and that his housing package could – if anything – create more problems. He claimed a chronic housing shortage meant that extra state support for mortgages could pump up prices.

The recent tax review chaired by Sir James Mirrlees, the Nobel prize-winning economist, described stamp duty’s structure as “especially perverse” and argued that there “is no sound case for maintaining stamp duty and we believe it should be abolished”.

It is often thought that stamp duty is paid for by the buyer of a property. They are indeed the ones who have to find the cash and cough up – but the bulk of the real burden actually ends up falling on the seller. Supply and demand always rule: the price of a home, and what the seller gets, is determined by the total cost of the transaction.

Hiking stamp duty means that buyers have less money to spend on the home, which pushes prices down compared with what they would have been in an untaxed market. Most of the loss is thus passed on to the existing owner, even though it is the buyer who actually hands over the cash to HMRC.

Correct, SDLT is a bad tax. But having explained, quite correctly that SDLT pushes down selling prices (anathema to the Homeys) it's particularly shitty of him to refer to the Mirrlees review which explained in depth why taxes on the annual rental value of land are vastly preferable to any other kind of taxes, be that SDLT or taxes on earned income.

And the whole shitty article is headed "George Osborne's aspiration nation is a sham - and stamp duty proves it". Hang about here, you shit, I thought the official Homey line is that "aspiration" refers to the desire to buy a home (and we are agreed that buyers don't actually bear the SDLT), whereas our Homey friend sees "aspiration" as being the "aspiration" to sell the home you already own for a higher price.

Then in rapid fire quick succession, from today's Evening Standard (probably the most Home-Owner-Ist outlet of all):

Page 2: George Osborne’s new help for homebuyers could push up house prices, the country’s budget watchdog warned today. Steve Nickell, of the Office for Budget Responsibility, gave a cool welcome for schemes that will see the Government guarantee a share of some people’s mortgages.

It's not "could" it's "will".

Page 6: Children are being damaged by readily available pornography and books such as Fifty Shades of Grey teachers warned today. Members of the Association of Teachers and Lecturers called for extra training to help them give lessons about pornography.

OK, that's not directly housing related but infuriating nonetheless.

Page 11: The wife of the new Bank of England Governor has sparked fury by suggesting that the couple are struggling to find a place to live in London despite receiving a £5,000 a week taxpayer-funded housing subsidy.

The irony being that it is her husband's job to drive up rents and house prices for his mates in the One Per Cent.

Page 15: Conservatism is a project of social ecology, whose semantic link with conservation is explicit. Both habits share, as Roger Scruton puts it, the aim of husbanding resources: in the former case, love; in the latter, land. The true conservative sees his relationship with the Earth not as one of ownership and exploitation but temporary custodianship. Our planet, being both our inheritance and our legacy, is a conservative cause, a gift that secures the contract between the living, the dead and the unborn. So steward it.

WTF. The true conservative sees his relationship with the Earth as a neat way of sweating the working classes for every penny he can get; it is a gift that secures the benefits of trickle-up economics for himself and his descendants.

Page 23: The Duchess of Cornwall today expressed concern at the plight of Londoners fighting to survive on low wages and benefits. Camilla was on a fact-finding mission to two charities in east London to highlight their work helping people who run out of money before pay day. She has taken a growing interest in the financial problems of people who struggle to survive on State hand-outs and low wages and has earmarked the issue as a priority for 2013.

Well then how's about getting your husband and his family to campaign to replace taxes on earnings with LVT so that these people don't have to pay income tax and get a Citizen's Income as a bonus?

Page 28: This Easter, will you be turning your home into a hotel? Thanks to a growing breed of London home-rental agencies, your house no longer needs to sit empty and attract burglars when you go on holiday. Instead, it can be hard at work, posing as a boutique getaway, earning you a nice contribution to your travels. A week’s rental can pay for a family to fly to Europe and back. It’s money for old rope.

A still photograph from a documentary about a 45-year-old IT engineer losing his virginity to a 68-year-old 'sex surrogate' has been published in a major UK newspaper.

The Daily Mail article about a documentary called "40-Year-Old Virgins" shows devout Christian Clive lying naked in bed with Cheryl Cohen-Greene, a sex therapist and surrogate sexual partner whose work inspired last year's Oscar-nominated film The Sessions starring Helen Hunt.

The article included salacious details about Ms Cohen-Greene performin a sex act on shy Clive, from Hertfordshire, and him having intercourse for the first time after a fortnight of radical sex therapy with the surrogate.

The Belgian blue female was killed after police chased the animal for two hours across Grantham, Lincolnshire.

Police said the cow had become aggressive, charging at several members of the public and a police officer, before jumping the fence into the car park of Belton Lane Community Primary School.

A first shot fired from the top of a large white van parked near to the children's school missed. The van was driven around the corner to get firearms officers closer and the second shot fired killed the cow.

All sounds a bit Keystone Cops to me. Was the copper desperately clinging on to the roof with one hand and firing with the other as the van sped round the corner? For extra comedic effect, with his third hand, the copper is trying to stop his helmet flying off.

Emergency services were called to Norwich Jobcentre Plus at about 9.40am this morning after a Rover car crashed into the front doors of the building in Pottergate.

The building has been evacuated and a cordon was set up around the building. However, no injuries have been reported.

A spokesman for Norfolk Police said: “The gold Rover 75 broke the glass doors at approximately 9.40am this morning. A man in his mid 30s was arrested on suspicion of criminal damage and dangerous driving and taken to the Wymondham Police Investigation Centre for further questioning.”

Surveys consistently show that the public does not approve of high salaries for senior staff in charities; indeed, last November's poll of 1,000 people by the consultancy nfpSynergy showed that 33 per cent of respondents thought charity chief executives should not be paid at all.

However, for what they see as very good reasons indeed, the Charities, where they can, prefer to overlook supposed public preferences for the way Charities should behave, taking the opposite view that :-

..... "The days are gone when you can get someone who performs well at a range of tasks, such as lobbying politicians, and rely on them to take a small salary on top of their commercial pension," [as] "You can't get people with the right skills nowadays unless you pay, because we're in a commercial market."

The article includes a link to a handy chart showing the results of this policy.

Third Sector has looked at the annual accounts of the top 150 charities by income, as listed on the Charity Trends website run by the Charities Aid Foundation, and created a list of the 100 charities that paid their top earner the most in 2011 or 2012.

The results reveal a wide variety, ranging from the charitable independent hospital that paid about £1m a year in 2011 to more mainstream charities and professional bodies paying between £120,000 and £130,000 a year.

Thirty of the top 100 earners were paid more than £200,000 a year and nine were paid more than £300,000. The mean average pay across the top 100 was £208,000 to £216,000 a year (a median of £165,000).

An interesting take on the whole thing comes from Ian Joseph, managing director for charities and not-for-profit at Russam GMS, a company that specialises in providing interim managers for charities, who "thinks some of the amounts paid by the charities in the study are unusually high [and] I think in the examples of a private hospital and Nuffield we have to ask whether they are really charities.

"I'm not saying that they are or they're not, but it raises a question about how you apply the public benefit test." before making clear that [he] has no problem with major charities paying six-figure salaries in general. "Senior executives have myriad stakeholder groups that they have to satisfy," he says. "They often have to generate income without selling anything and they have to manage a large number of volunteers. Running a charity is often far more complex than running a private business."

1. I personally am not too fussed either way, all newspapers and media are government propaganda in one way or another. Some support the actual elected government (or the elected opposition/government in waiting); most support the real government (banks, landowners and other cartels); and some are cheerleaders for a parallel government/system which doesn't actually exist (I'll put my hand up to that one).

2. So when you read anything, it's always interesting to see what spin they put on things and which particular parallel universe they inhabit, most are in the parallel Home-Owner-Ist universe where polarisation of wealth via the land market and tax system is seen as A Good Thing and some are in a parallel Keynesian universe where all government spending is viewed as A Good Thing, regardless of what it is spent on. And Osborne's recent splurge of subsidies for land prices keeps the Homeys and the Big Spenders happy, I suppose.

3. What completely baffles me is the fact that what kicked this all off was actual newspapers breaking actual criminal or civil laws - bribing policemen, stealing and leaking documents, ruining individual people's lives, invading privacy, covering up skullduggery, hacking telephones and bank account details etc etc. The fact it was newspapers doing this is more or less by the by.

4. I understand why politicians seized the opportunity to close ranks against the Murdoch empire which had played off one political party against another so successfully for so long; but at what stage did they cleverly shift the terms of debate from lots of individual offence being committed by newspaper companies and their employees to having some sort of political control over content?
---------------------------------------
Longrider misses the point slightly on Full English.

As I said in the comments, the real hard decisions here are toast, chips or waffles; and tea, coffee or other drink to accompany.

THERE is something truly terrifying about capital controls, the harsh restrictions that may soon be imposed on Cypriots. The freedom to take your money out of a country, and into another, at will and with no taxes, is an essential bulwark of a free society. It is also a central tool in a world of globalised commerce, multinational corporations, the internet and integrated supply chains.

The free movement of capital helps maximise an economy’s efficiency by allowing capital to be allocated where it is the most needed, regardless of country, and where it can generate the best risk-adjusted returns.

I am in principle against restrictions on people moving 'money' between bank accounts in different countries (provided governments are clued up enough to have a system of withholding taxes so this is not used for tax evasion), he is confusing 'money' with 'capital'.

1. To recap: 'money' doesn't really exist, it is a unit of measurement of indebtedness. Unless there is somebody somewhere prepared to run up debts (and thus create a financial liability) it is impossible for somebody somewhere else to have a financial asset. This does not apply to physical things which can be used as a convenient unit for barter transactions, like gold, but that is pretty much a red herring (you can still have debts denominated in units of gold). And if money does not exist it cannot be 'capital'.

2. 'Capital' on the other hand is real stuff, physical assets created by people; the value of your education; or the extra profits which arise (i.e. the extra capital creating capacity) when people specialise and trade with each other. So if you borrow €10,000 to buy a car, you have a real asset (a car) and a financial liability of €10,000. The hire purchase company has a financial asset of €10,000. You cannot simply add the real asset and the financial asset together to arrive at total assets of €20,000. It makes far more sense to count the car as a real asset of €10,000 and to net the financial liability and the financial asset off to nothing. Or let's imagine you borrowed the € 10,000 from an uncle who then dies and you inherit the financial asset, which you match off with your liability (you cannot owe yourself money). The total amount of real capital in the real world is unchanged when your uncle dies (depending on whether he could earn enough to pay for his own keep, it might actually be slightly reduced or increased).

3. So the only sensible starting point for looking at 'money' is the borrower himself and what the loan is secured on. In the context of Cyprus, let us assume that the government has issued bonds and wasted a lot of the money; the government has a nominal liability but no corresponding assets. Or the Cypriot banks have lent money secured on inflated land prices (they convert the rental value of land to a stream of interest payments), the loans are not secured on 'land' (which has no inherent value and does not generate cash or wealth) so the only source of income to pay the principal and interest is the borrower's real earnings (the extra amount he is willing or forced to pay to occupy if he wishes to occupy any particular site).

4. Some mortgage borrowers cannot or do not want to repay the full amount but the banks still have the nominal liability from taking in new savings or simply recycling the sales proceeds of the land as deposits again (splitting the zero). The bank's liabilities (deposits) are not some independent thing called 'money' which can be withdrawn or spent anywhere, they are a claim on the borrower's future income.

5. So while, in a perfect world, you can move your 'money' from one bank or one country to another, you cannot possibly move that borrower's source of income from one country to another, and you certainly cannot move the land value (ransom value) on which it is secured from one country to another. And if you own Cyprus government bonds, you can put them in a suitcase and move abroad, but you will still have to rely on the Cypriot government to actually pay up. Or taking the car example from 2. above, the hire purchase company can shift its head office to anywhere it likes, but the car owner is still (probably) in Cyprus.

6. So to sum up, what depositors in Cyprus banks and holders of Cypriot government bonds actually own are IOUs issued by people who can't or won't repay in full. The fact that the original nominal value of a deposit or bond was €100 is nigh on irrelevant. If the borrower (the person who issued the IOU) will only repay €80 then you do not have a deposit or bond of €100, you have a deposit or bond of €80.

7. If we accept that restrictions on moving 'money' are bad, then the corollary is that if you want to withdraw your entire deposit of €10,000 from a Cypriot bank and put it in a presumably safer German bank, you have to accept that the German bank will look at what they are really getting in exchange, which is an IOU issued by a Cypriot mortgage borrower or the Cypriot government, which is worth €8,000 and if they are acting rationally, they will offer you a deposit of €8,000 in exchange.

8. So you pays your money and you takes your choice. Do you prefer €10,000 in a Cypriot bank or €8,000 in a German bank? Or more realistically, do you prefer €10,000 nominal in a frozen Cypriot bank account which you can't access (and so it worth a lot less than €10,000, depending on how urgently you need it) or €8,000 in a German bank which is freely accessible?

9. If you take the common sense view, then the last sentence of the excerpt is complete gibberish. The real capital, in our example a car, will go to where it is most needed. So if you earn €20,000 from using the car in your window cleaning or delivery business in Cyprus but can earn €30,000 a year by taking it to Greece or Northern Cyprus or anywhere else, then that is what you will do .

10. Or taking a wider view, capital does not exist in a vacuum and pays for itself anyway. If somebody works out that it would be profitable to build a dam or a factory in Country XYZ, you need architects, engineers and workers to be in that country on the ground to build it, and you need workers and managers to run the factory, you need there to be demand for the hydro electric power which the dam generates, you need customers who will buy your output, or a delivery chain and infrastructure to get your output to the market. All the finance providers do is oil the wheels a bit and speed things up; in theory, the architects and workers could club together and do the construction "for free" in exchange for getting a share in the future income from the electricity users or the manufacturer who owns the factory etc.

It cannot possibly be a pre-condition that 'money' exists first and this allows capital to come into existence, because 'capital' was there first (the first tool or shelter fashioned by hand was 'capital') and 'money' did not exist until somebody was prepared to run up a debt.

Sunday, 24 March 2013

A LANDLORD has collected taxpayer-funded rents of £3,550 a week by letting out two modest former council properties.

James Wiemer, 56, rented two three-bedroom properties in central London to two families — one with five children, the other with six. In one case he converted the property into five bedrooms and, in doing so, made it potentially eligible for housing allowance payments of up to £1,800 a week.

Wiemer, 56, who has received total rents of almost £400,000 in just over three years, has now joined the two families in a legal attempt to retain extra payments after the government imposed a £400-a-week cap.

I've often liked BOM's expression - the Simple Shopper, to describe the disaster that is the government purchasing, but there's another side to it - the Simple Seller. Government isn't just bad at buying, it's also bad at selling:-

West Ham will be anchor tenants for the Olympic Stadium after the government agreed to put in an extra £25m towards the costs of converting the venue.

The additional money takes the Treasury's contribution to around £60m. Adapting the stadium could cost between £150m and £190m.

But the deal was secured only after West Ham agreed to increase their own funding of the project by £5m, to £15m. They will move in from August 2016 and pay around £2m a year rent.

So, we didn't just spend £500m on a white elephant athletics stadium, we're now spending a further £190m just to get rid of it, and West Ham are paying a peppercorn rent to get it (Emirates cost £500m, just to give you a comparison of the value of a new stadium).

Saturday, 23 March 2013

Around one in five European students have disappeared without paying back millions of pounds in loans to study at British universities.

Twenty-two per cent of students from EU member states have not be 'traced' after graduating - leaving UK taxpayers to pick up the bill. A study by the House of Commons library, reported by the Daily Telegraph, revealed that EU students were much less likely to repay their loans at all and more likely to go missing...

These students can apply for the same government support as British students to complete courses here, but critics do not believe the repayment of their debt is as vigorous in their own countries. The UK system of repayment means students reduce their debt with direct payments to the taxman through PAYE when salaries are over £21,000 a year.

There are fears that hundreds of millions of pounds in loans to EU students may be written off and the bill is likely to rise with the introduction of tuition fees of up to £9,000 for the first time last September.

Correct. The British taxpayer spends a lot of money on healthcare and education of foreigners. What the likes of the Mail overlook is that British people benefit from much the same if they are treated or educated abroad.

Assuming that all these agreements are entirely reciprocal (which they aren't, the UK government is useless at negotiating or enforcing these things), then it is just as silly for the UK government to try and collect the tuition fees for attending a UK university from an individual e.g. French student as it is for the French government to try and get money back from a British citizen who studied in France and then goes elsewhere.

What governments ought to be doing (and I believe they actually do this with healthcare up to a certain extent) is for the UK government to bill the French government directly for the tuition fees for French students and the French government to bill the UK government for the tuition fees for UK students. And we can do the same for healthcare costs for non-residents (i.e. tourists), parking fines etc incurred by non-residents and so on and so forth.

Then at the end of the year, all the inter-country charges can be netted off (so the UK might 'owe' France £900 million and France owes the UK £1 billion) and each government pays (or receives) the net balance payable or receivable (i.e. France now pays the UK net £100 million). The more types of charges are included in this exercise and the more countries are involved the better, because that means that the actual net cash payments at the end of the year are a small fraction of the gross amounts.

For example (plucking figures out of the air to illustrate the point), at the end of the year:
- UK owes France £900 and owes Germany £500;
- France owes UK £1,000 and Germany £200;
- Germany owes the UK £300 and owes France £800.

The gross amount owed is £3,700. But once it's all netted off, Germany pays France £400 and the UK pays France £100 and there is no need for there to be a payment between UK and Germany. See if you can work this out for yourselves with a 3 x 3 grid.

If an individual country then wants to chase its own citizens or residents for cost of education, healthcare or parking fines incurred in another country, then that is entirely up to them.

Friday, 22 March 2013

A soldier who "kept cool under fierce fire" as he led a 200m charge across open ground in Afghanistan wearing Ray Bans has been awarded the Military Cross.

Capt Mike Dobbin, 28, of the Grenadier Guards, is among 118 people recognised in the latest military honours. He led his soldiers to out-chill the enemy against the odds on four occasions.

Capt Dobbin, from Reigate, Surrey, led the attack while rolling a cigarette with one hand and in the face of machine gun fire just metres away.

In another incident, deep in enemy territory, part of the platoon found themselves seven metres away from four attractive young Afghan women and too afraid to make the first move. Capt Dobbin sauntered across and actually managed to get phone numbers from two of them.

His citation hails his "repeated hipness at pivotal moments" saying his "elegance in the face of hot and dusty weather inspired his men to read Kerouac books when the odds were most against them. He never once flinched from danger and introduced the rest of his platoon to the music of Miles Davis."

REMORTGAGE lender LMS called for an extension to the funding for lending scheme (FLS) yesterday after February showed a deep drop in remortgage lending.

Households drew £2.6bn of equity out of their houses in February, LMS figures showed, down 11.3 per cent compared to January, falling faster than overall mortgage lending.

The number of loans fell even further, by 12.4 per cent, from 20,332 in January to 17,812 last month. This meant there were 7.9 per cent fewer remortgage loans than in February 2012, together worth 1.8 per cent less.

"February’s monthly 11.3 per cent dip in remortgage lending can at least partly be attributed to a lull in remortgage applications over the Christmas and New Year Period," said LMS boss Andy Knee.

"However, the fact that it was still annually down by 1.8 per cent suggests that the FLS still needs more time to bed in and we urge the government to continue with the scheme in its current form."

Thursday, 21 March 2013

Between December 2011 and December 2012, the number of people employed in the public sector fell by 313,000 and the number of people employed in the private sector increased by 904,000, though these figures are distorted by almost 200,000 further education and sixth form college lecturers and teachers who are now counted as private-sector workers.

"they are completely free to express how brilliant our outsourcing schemes are in any arena they wish !” said a government spokesperson, seeking to rebut suggestions that the government was becoming increasingly heavy handed in its treatment of public servants who voice “negative” opinions about the government’s vital “corporate welfare” initiatives.

The intervention had been sparked by an article in the Guardian newspaper concerning instructions issued to staff working in the National Offender Management Service – colloquially known as the Prison Service and Probation Service – warning them, on pains of disciplinary consequences up to and including dismissal, not to write blogs or issue comments via Twitter, nor to venture such opinions to journalists etc. criticising Chris Grayling’s plan for “outsourcing” the management and rehabilitation of 'low risk' offenders to “the usual suspects”.

Referring specifically to the planned “Offender rehabilitation” outsourcing the spokesperson explained that “This idea builds on Chris Grayling’s experiences at the DWP; where he was the Minister responsible for the Work Programme, which as everyone knows is a cracking success, with results so far indicating that it is close to half as effective as having no “Work Programme” at all.

He has invited those organisations that have benefited from the Work Programme to bid to run “offender rehabilitation programmes for low level, low risk offenders” under similar arrangements. The long term likelihood is that by doing this he is safeguarding the jobs of NOMS staff because the successful bidders will need people experienced in this sort of work and, rather than incur the expense of recruiting and training them to an acceptable required standard will probably themselves simply publish offers of “sub contracts” under the scheme that local Probation Services will be able to bid for – the “outsourced work being immediately re-insourced” if you will.

This system is known to work because Atos, under the contract it has with the DWP for carrying out Work Capability Assessments, already re-insources some of this work to the NHS, and still manages to make a nice profit from the contract."

Justin Welby will today be officially enthroned as the Archbishop of Canterbury - and for the first time in history, the person presiding over the ceremony will be a woman...

In another break with tradition, Mr Welby has praised some Roman Catholic priests for the 'stunning, albeit very private, quality' of their relationships, and offered to meet prominent Catholic Pope Francis to discuss his position on modifying their vow of celibacy.

The new Archbishop has repeatedly expressed opposition to all sex outside of marriage, including between priests and their housemaids or choirboys, but in an interview with BBC News today he said: 'You see priest/housekeeper unions that are just stunning in the quality of the relationship.'

He added that his views had been affected by 'particular friends where I recognise that and am deeply challenged by it'.

After being publicly criticised by Pope Francis for speaking out against the vow of celibacy, Mr Welby emailed him thanking him for the 'very thoughtful' open letter and offering to meet to discuss the issue 'without the mediation of a priest'.

'I draw the line at letting them marry a choir boy though,' added the former oil company executive. 'I'm not completely mad.'

Wednesday, 20 March 2013

- council house right to buy discount increased? Check
- council house right to buy discount increased a bit more in London, so that MPs will have places to snap up in a few years? Check
- Bedroom Tax for snivelling ingrates in social housing? Check
- Council Tax increases kept to well below inflation for severalth year running? Check
- £1 billion in soft loans to residential landlords? Check
- income tax breaks for wealthy middle aged businessmen to build up a BTL portfolio? Check
- schemes to help First Time Buyers extended to Second Steppers? Check
- extension of NewBuy to "second hand" homes? Check
- increase limit for these schemes to houses costing £600,000? Check
- government to underwrite up to £130 billion in new mortgages? Check (see previous link)
- builders' share prices up five or ten per cent? Check
- extend the Funding for Lending Scheme? Check
- abandon the inflation target and print more money? Check
- new construction figures kept at the 100,000 mark, the lowest since the 1920s? Check
- £290 million subsidies to sell government owned land at undervalue to private developers? Check (emailed in by BobE)
- £225 million Danegeld to persuade developers to finally finish off half-finished stuff? Check

Several of these emailed in by MBK, who adds, "They are not just throwing the kitchen sink at it, they are throwing the plumbing at it and chucking in the boiler for good measure."

I've overlooked any, please leave a comment and I'll add them to the list.

The news sent Barratt Developments more than 7% higher to 257.2p, making
it the biggest riser in the FTSE 250 mid-cap index. Close behind was
Taylor Wimpey, up 6% to 91p, Persimmon, up 5% to £10.24, Bellway, 4%
better at £12.34 and Redrow, up 3.8% to 191p.

Twas truly a budget for everyone today, as alongside the Help to Buy scheme (see earlier post) and the "improvements" in Right to Buy (see earlier post) those of you still concerned that there was apparently very little coming forward to help one important group in society (well, apart from those Right to Buy changes which might see some more former social housing ripe for scooping up a few years down the road) can rest easy because...

The government’s build to rent programme has been boosted by £800 million. Chancellor George Osborne announced in today’s Budget statement that the fund, which was first announced in the autumn statement last year, would be increased from £200 million to £1 billion ‘to support the development of more homes in England’.

The fund provides equity or loan finance to developers building homes to privately rent. It had previously been hugely oversubscribed.

Ian Fletcher, director of policy at the British Property Federation, said: ‘It’s encouraging the government’s confidence in build to rent has been reciprocated and we are delighted to see that the equity funding was heavily oversubscribed. Working in partnership with government the sector should deliver an exciting and quality array of homes for renters.’

The Chancellor said the scheme will be available to everyone who wants to buy a home, old or new, under the Help to Buy scheme from 2014.

He will help people get on or move up the property ladder by offering Government "mortgage guarantees" worth £130 billion in total. This will mean people can afford bigger mortgages with a small deposit.

Many people have struggled to save up enough since banks scrapped their best mortgage lending deals after the financial crisis.

In a separate part of the initiative, the Government will offer interest-free loans for five years if people want to buy new-build homes. The loans will be worth up to 20 per cent of the value of a newly-built homes, with the buyer contributing 5 per cent as a deposit.

I suppose the only good news is that the take-up of these schemes is very low. Ed Miliband pointed out that only 1,500 households had bought a house under the previous wizard wheeze (NewBuy or whatever it was called).

My problems with Not Red Ed are threefold:

1. His lot invented just as many of these stupid schemes to prop up land prices and banks, and the take-up was just as low.

2. He seemed to think that a low take-up was A Bad Thing. It's not, it's A Very Good Thing Indeed, the ideal take-up would be precisely zero.

3. He confused me at first by saying "how thing", which I assumed was groovy txt speak for "How's things?". After a few sentences I realised he was trying to say "housing".

Thousands of London mortgage salesmen will get a chance to lend money to London's higher earning social tenants to buy their homes under a major extension of the Right-to-Lend in tomorrow’s Budget, the Evening Standard reveals today.

George Osborne will raise to £100,000 the maximum incentive to persuade tenants in London to swap a secure tenancy at a low rent for five years of debt slavery during the lock-in period, after which they will be able to sub-let the home for a huge guaranteed profit or to sell it to an aspiring homeowner or BTL landlord who will have to take out an even larger mortgage.

One Council of Mortgage Lenders spokesman said it could "unleash a new generation of land-price speculation and mortgage lending in the capital". The rise, from £75,000, reflects the higher land rents of London property compared with other regions...

Mr Osborne has hailed Right-to-Sublet, which was introduced by Margaret Thatcher in 1980, as "one of the greatest trickle-up policies of all time. As The Daily Mirror pointed out recently, forty per cent of homes bought by tenants are now in the hands of landlords; and with prices as high as they are, it's difficult for banks to lend even more money on the existing housing stock."

It gives long-standing tenants a discount of up to 50 per cent if they buy their taxpayer-owned home from the taxpayer. Sources say David Cameron personally backed the move and pushed it through against feeble resistance from the Liberal Democrats who just don't get it.

Andrew Johnson, the business development spokesman for the British Bankers Association said: "A £100,000 discount could make the difference to thousands of hard-working London bankers who could not otherwise dream of lending social tenants hundreds of thousands of pounds. It’s the time for the Chancellor to grab the Right-to-Rent bull by the horns and unleash a new generation of Home-Owner-Ism in the capital."

Six Right-to-Speculate sales have been completed in Hammersmith & Fulham since the discount nationwide was raised to £75,000 last year, with a further 37 awaiting completion. But a study last year found that discount was not enough for most financial service industry insiders and future BTL landlords.

Average house prices in London have reached £403,000 for the first time. It is 15 per cent above the £350,000 peak in January 2008 before the short-lived house price dip, which triggered a decade long financial recession.

When most people think about tax, they think of income tax. This, largely, is taken directly from your pay each month, or through self-assessment tax forms if you are self-employed...

The article then goes on to list and explain the main taxes which people pay and summarises in this handy table:
I can see two big mistakes right there:

1. They missed off Employer's National Insurance, which is another £5,177.

2. VAT is on average at least 7% of people's gross earnings or total income (with a wide range, depending on whether you work for a VAT-able or a non-VAT-able business).

If you adjust for those two and treat Child Benefit as negative tax, the actual tax bill on Mr & Mrs Average is something like £22,600, i.e. half their total earnings. Which is hardly surprising, because the government spends/redistributes about half of GDP.

Tuesday, 19 March 2013

The Jedi council has raised concerns about Jedi and Nerfherder ceremonies being joined by a third category.

Jedi spokesman, Luke Skywalker told BBC Tatooine: "The third category is quite astonishing because it is the so-called belief category without really defining what belief means."

There are loads of people in a diverse society like this for whom belief can mean virtually anything - Christians and Jews - who knows?

"I am not saying that we don't give place to that kind of personal belief, but when you start making allowances for marriages to be performed by people who believe in made-up stories from a long time ago in a galaxy far far away within those categories then you are all over the place."

SHOCKED members of a Bournemouth fitness centre had a “miraculous” escape after a sports car crashed through the gym’s main window as they worked out.

The Toyota Celica GT ploughed into PureGym, sending glass flying and ending up among exercise equipment on Friday night. Recovery workers attending the scene the following day said it was a miracle nobody was seriously injured.

Seconds after the car smashed through the window, at around 11.30pm, two women were spotted jumping from the vehicle and fleeing the scene.

Changes to the state pension announced at the weekend will bring the exchequer a stealth windfall of almost £6bn a year from 2016-17, mostly paid by public sector employers and employees in the form of increased national insurance contributions.

The extra NIC deducted from public sector employees' pay packets (if they end "contracting out") is indeed a reduction in government spending, and HMRC can book an increase in receipts from public sector employees as extra income if they so wish but the extra receipts from public sector employers is matched by an equal increase in government spending to pay the extra employerer'sNICs in the first place.

It's an uphill struggle all this. A working assumption must be that most people really are as thick as pig shit (is pig shit actually "thick" or is it more runny? No idea.).

Pointing out that this is a self-cancelling transaction is about as futile as trying to explain that interest paid to HM Treasury on its holding of UK gilts is HM Treasury's income but it's also HM Treasury's expense because they are paying the interest in the first place. Or the fact that Housing Benefit claimed by social tenants is not government spending because the money is being paid by one branch of the government (DWP) to another branch (local councils) who then pass it back to HM Treasury anyway, who in turn fund the DWP and so on ad infinitum.
--------------------------------------------------------------------------2. Basic accounts

Lola alerted me to Douglas Carswell's bright idea on banking reform, which is pretty much the same as Positive Money's bright idea, and they say so themselves:

My Bill would give account holders legal ownership of their deposits, unless they indicated otherwise when opening the account. In other words, there would henceforth be two categories of bank account: deposit-taking accounts for investment purposes, and deposit-taking accounts for storage purposes.

Apart from the fact that the government do not want to reform banking in the slightest, as the UK government (like so many other governments, including but not limited to the USA and the EU) is run by, for and on behalf of bankers, this will not achieve anything:

1. Let's gloss over Carswell's fundamental error that credit creation starts with somebody depositing money in the bank. No it does not. It starts with the bank making a loan.

2. And let's gloss over the fact that banks would manage to circumvent the rules on a practical level, for example by lending out money taken for "storage purposes", booking the corresponding receipt as being for "investment purposes" and then slipping the money back into "storage" again before anybody notices, i.e. by the end of the each day's trading.

3. The point is, we do not need to mull over what would happen if customers were offered two different types of accounts, because we already know.

Twenty years ago, we still had the Post Office Bank and the Trustee Savings Bank, which were government run/sponsored, implicitly 100% government guaranteed and safe. And we had commercial banks, which also had some sort of government guarantee for deposits, but it wasn't very high (it was up to 90% of the first £30,000-odd until a few years ago, I've no idea what it was twenty years ago).

And twenty years ago, we had a lot of building societies, which were inherently safer than banks (because of what they did, how they did it and all the restrictions imposed on them).

4. So instead of making commercial banks offer two different types of accounts (which can be easily circumvented, see 2.) we could simply set up a new government bank (similar to PO or TSB) and offer people "basic accounts" which pay little or no interest, offer no overdrafts, which do direct debits and offer a debit card and not much else, and which are 100% government protected.

In this case, there would be no need to make commercial banks offer "storage purpose" accounts or to give a government guarantee for deposits with commercial banks because if people want that, they can put their money with the new PO-TSB. And if they want something a bit racier without a guarantee, they are free to open an account with a bank on whatever terms and conditions they please.

5. Will commercial banks continue to merrily blow credit bubbles and land price bubbles, like they always have done, with or without government guarantees for deposits, with or without there being safer types of investment, with or without all but the fiercest bank regulations? Yes of course they will. They'll keep splitting the zero and creating new loans and new "investment purpose" accounts.

6. Will people be happy with this? No of course not. During the next boom, people's urge to make a quick buck and get something for nothing (or the politicians desire to be seen to be giving the voters something for nothing) will take over, the PO-TSB will be privatised, demutualised, become a quoted company, over-trade and then go bankrupt again, the government will bail them out etc, and then the cycle starts again.

7. And during the next bust, the government will simply extend the deposit guarantee to all accounts again, or increase the eligible amount, just like they did this time.

As ever, the real problem here is the bankers (and landowners) tapping into people's desire to make a quick buck and get something for nothing, and the politicians just going with the flow.

People have to remember that they are the ones who end up paying for the quick bucks - for sure, all Halifax members got £1,800's of "free shares" in the 1990s (I've still got my contract note selling them on the first day) but we've ended up paying a lot more than £1,800 each to bail out Lloyds-HBOS. Its the usual vested interests who are getting richer from all this, not the likes of us common or garden voters.

The study, based on a survey of 11,000 13- to 16-year-olds, is an attempt to map the job ambitions of teenagers against the employment market up to 2020. It shows teenagers have a weak grasp of the availability of jobs - and that large numbers will be aiming for jobs that are in short supply. For instance, there are 10 times as many people aiming for jobs in the culture, media and sports sector than there are jobs likely to be available.(1)

And even though almost a quarter of jobs are in the distribution, hotels and restaurant category, only about one in 40 youngsters are considering careers in these industries.(2) Fewer than one in 30 young people are considering jobs in banking and finance, even though one in five jobs are expected to be in this sector.(3)

This "misalignment" could mean long-term problems for young people, the report says, because they are making decisions about qualifications and subjects with little awareness of the jobs market ahead of them.(4)

2) Because they are not particularly glamourous and there's no hope of a superstar salary. But you do not need to dedicate ten or twenty years of your childhood, adolescence and early life to landing that dream job at McDonalds or UPS; if you fail to break into the hallowed ranks of pop stars, TV presenters, Premier League footballers etc despite your best efforts, then fair enough, you apply for a job in a shop or a café or a warehouse and work your way up. Hence and why I ended up as an accountant rather than Formula One racing driver or a record producer.

3) F-ing hell. There's your "misalignment" right there. Of course we need people to do the bookkeeping and run the banks' payments systems, this is all good stuff and the economy wouldn't function nearly as well without it, but it can't possibly required one person to do the bookkeeping or run the banks' payment systems for every four* people actually doing something useful, can it?

4) See 2). So what? You don't need to spend your whole adolescence building up skills, qualifications and contacts to break into the rarefied world of lorry drivers and hotel night managers.

* We could knock off a further % of people in public and private sector non-jobs to arrive at an even worse ratio, like one for every three and a half.

According to analysis by ratings agency Moody’s, there are about 52,000 borrowers aged over 60 in the UK on interest-only mortgages that mature before 2016 and who have less than 20pc equity in their homes.(1)

With the regulators cracking down on interest-only deals and rates expected to rise in the next two years,(2) the group is unlikely to be offered equivalent terms to those they are on, Moody’s warned. "Older borrowers with interest only loans face refinancing risk," it said.

Annabel Schaafsma, a manager in Moody’s structured finance group, said: "The most at-risk group are those with deposits of less than 20pc. Some will have to use their savings to repay the mortgage.(3) Others will have to downsize.(4)"

The analysis is surprising as older borrowers have been the main beneficiaries of a massive housing boom, with house prices trebling between 1997 and 2010 alone. However, separate research by Fathom Consulting suggested they may be carrying large debts because they released equity to help their children.(5),(6)

1) How on earth is that possible? Assuming a 60 year old couple bought 30 years ago with a 75% mortgage when the average house price was £26,307 (Nationwide), their mortgage principal was £19,730 (I'm not even sure that there were many interest-only deals 30 years ago, but let's assume), then assuming an average house price today of £163,000, they have 88% equity (more or less for free). So basically they must have pissed about £110,000 of mortgage equity withdrawal up the wall in the mean time.

2) The Homey élite have been spinning this one for five or six years, it is all part of the plan to stampede people into "getting onto the property ladder now" (quite why is a mystery; if people really believed that interest rates would go up, then all things being equal, hosue prices would go down).

3) Thus reinstating what the position would have been had they taken out a repayment mortgage.

4) Probably a good thing in and of itself; that way we don't need to build so much new housing for the next generation.

5) That's a lie. People who took out interest-only deals 20 or 30 years ago could not possibly have assumed that prices would sky-rocket the way they did. And those who took out a second mortgage recently to "help" their children into a lifetime of debt slavery probably wouldn't have been given an interest-only mortgage anyway.

6) This is the Achilles' Heel of Home-Owner-Ism. It's all well and good sitting around gloating about how wisely you invested, but sooner or later surely it will dawn on people that not only have they ruined their children's lives but that they are getting dragged back to the bottom of the pyramid? Or maybe not.

Monday, 18 March 2013

Mike "Mish" Shedlock in the comments at Golem XIV links to his own blog where he in turn posts an email from somebody who has done his homework:

I read with interest your article on the Cyprus bailout deal. After a quick review of the most recent financial statements of the four publicly listed Cypriot banks as shown on their websites, it is notable that a simple alternative proposal could protect the country from bankruptcy and make its depositors whole.

By wiping out 100% of the equity, 100% of the bondholders, and 17% of the banks’ liability to central banks, the Cypriots could stabilize their banking system (based on the 5.8Bn EUR figure being discussed) without penalizing local savers.

Instead of raising 5.8Bn EUR from depositors, it could raise 1.4Bn from combined market cap, 2.0Bn from bondholders and preferred shareholders, and 2.4Bn of the 14.3Bn in combined Central Bank loans (Cypriot and ECB) it has on its books. This assumes zero contribution from the Cypriot subsidiaries of foreign banks so it may be conservative.

If the banking system is bankrupt, anything other than an Alice-in-Wonderland recovery system suggests that the order of liquidation is shareholders, preferred shareholders, debt holders, Central Bank creditors, and THEN depositors. If 10Bn or even 17Bn EUR is truly required, then coincidentally up to 17.7Bn EUR is available from equity holders, debt holders, and Central Bank creditors without impairing a euro cent from depositors.

That's much the same picture as with UK banks. Their losses (i.e. bad debts) so far as a percentage of total assets were relatively small (certainly less than 5%, even in the case of Northern Rock) and they could have been straightened out by converting a proportion (about a quarter or a third) of the bonds they have in issue to share capital. This might or might not involve cancelling existing shares, that's a minor issue. There was no actual need for the taxpayer to pay for bank bail-outs, that was just pilfering and looting on a grand scale during the smokescreen of a recession.

The idea of cancelling loans from the government is a bit off piste, because that's effectively saying that income taxpayers should pay it. I think that the general idea here was that they didn't want Cyprus to do like Ireland, have the government underwrite the banks and then go even more horribly bankrupt itself.

Writing down deposits and/or converting them to share capital is also a kind of tax (some have described the Cyprus idea as a "wealth tax") but even then, to the extent that a share capital and bond capital write-off won't cover the losses, it is far better to have a one-off specific "tax" on depositors (or pro rata write down of deposits) and have done with it*, than it is to bail out banks via inflation, low interest rates (these two are also "wealth taxes") and taxes on earned income (the worst kind of tax), which is what they have been doing in the UK (as Philip Inman says in The Guardian).

* Or even better, convert everything back to deposits, sack the top echelons of "management" and turn the bank into a building society again.